【方法論】聯合綠色第二方意見方法論

1. Scope

This methodology describes how Lianhe Green Development Co., Ltd (Lianhe Green) conducts a Second Party Opinion (SPO) on sustainable finance frameworks and instruments after issuance. This methodology covers our general approach when providing SPO on Green, Social, Sustainable, Transition or Sustainability-Linked finance instruments (such as bonds or loans) or finance frameworks, whether using a use of proceeds approach or the sustainability-linked approach, collectively known as “sustainable debt instruments” and their associated frameworks.

This Methodology applies to a wide range of finance instruments and finance frameworks globally, including those issued by corporate entities, financial institutions, multilateral development banks, as well as sovereign, regional and local governments, and project structured finance instruments. In determining the applicability of this methodology, we review the specific circumstances of each finance instrument or finance framework.

For market participants wishing to assess the sustainability credentials of an issuer/borrower’s specific finance instruments or finance frameworks, SPOs provide an independent and comparable assessment of their environmental or social contributions. The analytical factors incorporated into our SPO approach are designed to distinguish finance instruments and finance frameworks that make a material contribution to long-term sustainable development from those whose green or social impact may be overstated or unclear. This includes consideration of the alignment of the finance instruments or finance frameworks within the context of the issuer/borrower’s sustainability strategy.

 

SPOs cover sustainability elements that may be of interest to market participants, but SPO assessments are not credit ratings. When establishing an SPO, we may consider data, information or assessments publicly disclosed by the issuer/borrower, particularly those regarding financing instrument documents or finance frameworks; published research or indicators from Lianhe Green; or from relevant third-party sources. We may also use non-public information provided by issuers/borrowers.

 

2. Methodology

Lianhe Green’s SPO methodology provides an independent benchmark assessment of the alignment of sustainable debt instruments and their frameworks with generally accepted market principles and/or guidance. These principles and/or guidelines include, but are not limited to, the following:

       • International Capital Markets Association (ICMA)’s Green Bond Principles (GBP);
• ICMA’s Social Bond Principles (SBP);
• ICMA’s Sustainability Bond Guide (SBG);
• ICMA’s Climate Transition Bond Guidelines (CTBG);
• ICMA’s Sustainability-Linked Bond Principles (SLBP);
• ICMA’s Guidelines for Green, Social, Sustainability and Sustainability-Linked Bonds External Review;
• The Green Loan Principles (GLP) of the Loan Markets Association (LMA), the Asia Pacific Loan Markets Association (APLMA) and the Loan Syndication and Trading Association (LSTA);
• LMA/APLMA/LSTA’s Social Loan Principles (SLP);
• LMA/APLMA/LSTA’s Transition Loan Principles (TLP); and
• LMA/APLMA/LSTA’s Sustainability-Linked Loan Principles (SLLP).

The SPO’s primary focus is an analysis of the environmental and/or social impacts of a sustainable debt instrument framework and the issuer/borrower’s commitment to following market best practices.

For finance instruments or finance frameworks with use of proceeds for green, social and sustainable finance instruments, we assess their alignment with the principles based on five factors: use of proceeds, project evaluation and selection, management of proceeds, reporting, and external review. Where transition finance instruments or finance frameworks are involved, we additionally assess the alignment of the entity-level transition strategy with relevant guidelines. For sustainability-linked finance instruments or finance frameworks, the evaluation is based on five factors: selection of key performance indicators (KPIs), calibration of sustainability performance targets (SPTs), bond characteristics, reporting and verification. The SPO outcomes are divided into four grades: Not Aligned, Aligned, Good, and Excellent.

We assess alignment with principles published by the ICMA and other organizations which set out the required and recommended practices to ensure transparency and accountability in documents for finance instruments or finance frameworks, whether categorized as use of proceeds or general purpose.. Our assessment also takes into account the best practices identified within the market. When assessing alignment with other principles or standards, some considerations may differ, or the impact on the score may be different. For example, when a principle is a recommendation rather than a requirement for alignment, we adjust our assessment accordingly.

 

In addition to providing SPO scores following the methodology described in this document, we can provide supplementary opinions on alignment based on specific frameworks or criteria selected by the issuer/borrower.

The results of the analysis are expressed in the following four grades:

Grade	Description of compliance
Excellent	Such finance instruments or finance frameworks incorporate the necessary practices under the Green, Social, Sustainability or Sustainability-Linked Bond Principles or the Green, Social or Sustainability-Linked Loan Principles, as well as the recommended practices or market best practices under these principles.
Good	Such finance instruments or finance frameworks comply with all necessary practices of the Green, Social, Sustainability or Sustainability-Linked Bond Principles or the Green, Social or Sustainability-Linked Loan Principles and may incorporate some, but not all, of the recommended practices and market best practices.
Aligned	Such finance instruments or finance frameworks incorporate the necessary practices of the Green, Social, Sustainability or Sustainability-Linked Bond Principles or the Green, Social or Sustainability-Linked Loan Principles.
Not Aligned	This finance instrument or finance framework does not fully incorporate all the necessary practices of the Green, Social, Sustainability or Sustainability-Linked Bond Principles or the Green, Social or Sustainability-Linked Loan Principles, although some of the necessary practices may have been partially or fully incorporated.

 

Issuer/Borrower Sustainability Background

We provide issuer/borrower sustainability context to demonstrate our view on how financing can help address the sustainability factors we believe are most important to issuers/borrowers. The context also determines how well the issuer/borrower manages other sustainability factors that we consider relevant to financing.

We consider the following four aspects of background information:

o   We examine the correlation between the sustainability factors that we consider relevant to financing and the sustainability factors that are most important to the issuer/borrower. We conduct our review by considering the issuer/borrower’s industry, geography and operations, as well as the scope of the financing.

o   We search for sustainability news relevant to the issuer/borrower and national or local policies in the jurisdictions where the projects operate.

o   We review an issuer/borrower’s sustainability strategy, including relevant sustainability reports, public statements, actions, targets and policies.

 

o   In our analysis, we may also consider the background of other entities related to the issuer/borrower, if relevant.

Environmental and Social Benefit Analysis

We conduct detailed environmental and/or social benefit analysis based on the projects or sustainable performance, provide investors and decision-makers with detailed information on the environmental and/or social benefits of the project, and understand the impact of the project on the environment and society.

We focus our analysis of environmental and social benefits on the following aspects:

o   Alignment of the use of proceeds or target setting with the issuer/borrower’s own sustainability strategy.

o   Positive impacts of the use of proceeds or target setting on the sector or region.

o   Consistency of the use of proceeds or target setting with local laws, regulations and policies.

 

o   Whether potential eligible projects present significant adverse environmental and/or social impacts.

 

3. The Use of Proceeds Finance Instruments SPO Process, Content and Assessment Method

Our alignment analysis is divided into core factors of standardization based on common areas across each principle. The core factors we use to assess are:

o   Use of Proceeds

o   Project Evaluation and Selection,

o   Management of Proceeds

o   Reporting, and

o   External Review

In particular, for SPOs on transition finance instruments, we will additionally include entity-level transition strategy as a core analytical dimension.

For each component of the financing analysis, we assess whether it meets the minimum requirements for alignment under the relevant principles. Alignment for the overall financing can only be established if all relevant analytical components meet the alignment requirements.

 

At the request of the issuer/borrower, if a finance document refers to the Sustainable Development Goals (SDGs), we will consider its contribution to those goals. We compare financing activities to ICMA’s SDGs and outline their expected linkages in our SPO analysis. Our assessment of the SDGs will not affect our consensus opinion.

The weight of each core factor is as follows:

 

 

Principle Core Pillars Analysis

Entity-level Transition Strategy (Applicable only to the assessment of transition finance)

 

An entity-level transition strategy is one of the core components of transition finance, and it may take two forms: a transition plan or transition indicators. We will assess whether the issuer/borrower’s transition plan includes clear measures, a defined timeline, a sound governance structure, science-based transition targets, and a system for monitoring and updating the implementation of the transition plan. Where a transition plan cannot yet be developed, the issuer/borrower may instead establish a set of transition indicators.

Assessment of Use of Proceeds :

Our analysis of the use of proceeds considers the alignment between the commitments in the finance documents and the relevant principles for the use of proceeds. We focus on whether the issuer/borrower has a clear commitment to using the proceeds for sustainable projects. To ensure alignment in the use of proceeds for green projects, we require that the project categories directly financed by  the funding must have clear environmental objectives and environmental benefits, and comply with the relevant green taxonomy applicable in the location. If no such local standards exist, international taxonomies shall be applied. As for the alignment in the use of proceeds for social projects, on the basis that the financed project must have clear social objectives and social benefits, we conduct an analysis with reference to the United Nations’ Sustainable Development Goals. We require that social projects directly aim to solve or alleviate specific social problems, or provide clear social benefits to target groups. Different principles and sustainability classification systems may have varying eligibility requirements for green or social projects in the use of proceeds, which we will take into account in the analysis of the use of proceeds.

Criteria for sustainable bonds and loans mainly concern the definition of eligible projects (included in finance instruments or finance framework documents), as well as the sustainable objectives and benefits of these projects. We assess projects to be financed or refinanced for eligible environmental or social categories.

When assessing the alignment of the use of proceeds, we assess the clarity of eligible categories, including whether the descriptions of expected expenditures are clear and comprehensive, and whether eligibility criteria, exclusion criteria, project locations, and target populations are disclosed. In addition, we assess the clarity of environmental or social objectives. We focus on the relevance of eligible categories disclosed by the issuer/borrower and their alignment with international standards, such as China’s Green Finance Endorsed Project Catalogue (2025 Edition), the Hong Kong Taxonomy for Sustainable Finance, the European Union Taxonomy and the United Nations Sustainable Development Goals.

Finally, we assess the clarity of expected benefits. We focus on the clarity of the description of the expected benefits of eligible projects and whether these benefits are measurable and meaningful to achieve relevant objectives. In the Finance project classification assessment, we will reference and analyze the relevant local classification standards, including but not limited to: China’s Green Finance Endorsed Project Catalogue (2025 Edition), the Hong Kong Taxonomy for Sustainable Finance and the European Union Taxonomy

 

For transition finance, we first conduct a comprehensive assessment of eligible transition project categories. Second, we assess whether the greenhouse gas (GHG) emission performance of eligible projects is superior to the business-as-usual (BAU) scenario, and conduct benchmarking analysis against industry standards and peer levels to verify alignment with regional and international decarbonization pathways. Finally, we consider whether the project entails a carbon lock-in effect.

Assessment of Project Evaluation and Selection :

Our analysis focuses on how clearly issuers/borrowers outline their project evaluation and selection processes in their documents to ensure that any projects they select meet the environmental or social requirements of the relevant principles.

Generally, the related principles require an issuer/borrower to explain its project selection process, the eligibility criteria it applied to select those projects (including applicable exclusion criteria, if any) and the overall sustainability objectives underpinning the selection process.

When we assess our alignment score with the principles, we consider the factors including transparency and quality in the selection process, internal review and balancing of relevant teams, internal control structure, and environmental and social risk mitigation process.

Management of Proceeds Assessment:

Our management of proceed assessment considers whether financing documents are aligned with relevant principles to determine how proceeds will be managed throughout the term of the facility. We focus on the issuer/borrower’s level of commitment to ensuring that proceeds will always be used for qualifying sustainability projects.

When we assess our alignment score with the principles, we consider the factors including proceeds allocation and tracking disclosures, net proceeds, and allocation monitoring.

Reporting Assessment:

ICMA’s principles state that issuers/borrowers should report the use of proceeds annually until fully distributed. They also noted that the information presented must include a list of projects receiving financing, a description of each project (including the amount allocated to each project), and expected environmental and social impacts.

 

When we assess our alignment score with the principles, we consider the factors including the disclosure of allocation report (an important transparency indicator that enables investors to understand how proceeds are effectively allocated) and impact report.

Assessment of External Review :

The above principles strongly recommend that issuers/borrowers appoint an external review agency to confirm whether their sustainable debt framework follows the above four core elements (i.e. use of proceeds, project evaluation and selection process, management of proceeds, and reporting) before issuance. In the process of the issuance, the external review guide aims to promote best market practices. It is an initiative based on market practices and aims to provide issuers/borrowers, underwriters, investors, other stakeholders and external review agencies with relevant external review guidelines and information on the review process to promote transparency.

 

When we assess our alignment score with the principles, we consider the factor of the commitments to external reviewers.

 

4. The Sustainability-Linked Finance Instruments SPO Process, Content and Assessment Method

Our alignment analysis is divided into standardized analysis components based on common areas for each principle. For sustainability-linked finance instruments or finance frameworks, we assess their alignment with the principles based on five factors: 

o Selection of Key Performance Indicators (KPIs);

o Calibration of Sustainability Performance Targets (SPTs);

o Instrument Characteristics;

o Reporting; and

o Verification.

For each component relevant to the financing analysis, we assess whether the financing meets the minimum requirements for alignment with the corresponding sections of the relevant principles. All relevant analytical components must be aligned for an overall alignment outcome to be achieved.

The weighting and analysis scope of each core factor are as follows:

Pillars	Proportion
Selection of Key Performance Indicators (KPIs)	30%
Calibration of Sustainability Performance Targets (SPTs)	30%
Instrument Characteristics	15%
Reporting	15%
Verification	10%

 

Principle Core Factor Analysis

Selection of Key Performance Indicators (KPIs) Assessment:

An issuer/borrower's selection of clear and robust key performance indicators (KPIs) that are material to its sustainability strategy is an important consideration when we assess our Alignment Score. When evaluating the alignment of selection of KPIs, we consider the following sub-factors:

1.     Definition: We assess whether KPIs are clearly defined and disclosed. Positive considerations include a precise description of the KPIs, including units of measurement, scope (i.e., the entities or operations to which the KPIs apply), calculation methods, and the rationale and process for selecting the KPIs.

2.     Measurability, verifiability and benchmark ability: We assess whether KPIs are (i) measurable, i.e. whether they can be assessed quantitatively; (ii) verifiable, i.e. whether they have been externally verified or can be externally verified by a qualified third-party reviewer; and (iii) Benchmarkable, i.e. they rely on external references or can be benchmarked against recognized reporting frameworks.

3.     Relevance and materiality: We typically assess the soundness of disclosures made by an issuer/borrower to demonstrate whether selected KPIs are relevant, core and material to the issuer’s business strategy and sustainability challenges. Demonstrating KPIs that reflect significant sustainability challenges in the issuer/borrower’s industry and are aligned with industry standards, priorities and goals will positively impact the score.

4.     Historical disclosure: We understand the company's historical data and goals and assess whether KPIs have been identified and disclosed in the past few years. We pay more attention to those KPIs that have been used over a period of time as well as the company's historical data and goals.

 

5.       Qualification verification: We assess whether qualified independent experts or auditors have been involved in the verification of the KPI at the date of issuance and history, allowing us to understand the importance of the target to the entity.

Calibration of Sustainability Performance Targets (SPTs) Assessment:

Clearly defined sustainability performance targets (SPTs) are calibrated, aligned with the issuer/borrower's sustainability strategy and represent significant ambition to achieve its stated objectives, factors that influence our view of the quality of a deal or framework structure. In assessing the alignment of calibration of SPTs, we consider the following sub-factors:

1.     Challenge: We assess the alignment of SPTs with the issuer/borrower’s sustainability goals. SPTs that are aligned with the objectives communicated by the issuer/borrower's sustainability strategy or achieve sustainability targets within a defined time frame will have a positive impact in our assessment.

2.     Disclosure: We assess the level of transparency provided in the definition of SPTs. Relevant elements of transparency include timelines, baselines, and triggering events for implementing SPTs.

3.     Quality: For environment-related targets, we assess their alignment with the Science Based Targets initiative (SBTi), science-based taxonomies and net-zero strategies. For social responsibility-related targets, we assess their contribution to relevant SDGs and the focus on specific vulnerable groups.

4.      Target observation time: The target’s observation date is important because its positioning can lead to opportunistic behavior and misleading data. 

Instrument Characteristics Assessment:

Lianhe Green focuses on whether the issuer/borrower discloses trigger events arising from the failure to achieve SPTs, as well as their potential impact on the financial or structural characteristics of the financing instrument, including the effect of breaching such trigger conditions on its financial costs.

In assessing the alignment of instrument characteristics, we consider the following sub-factors:

1.     Impact on company reputation: Extensive disclosures, including to investors or lenders, carry a positive weight in our assessment.

2.   Financial impact: We look at what is typical in different markets. The same applies when it comes to different types of financial impacts, such as basis point hikes or principal premiums. The greater the impact on a company's financing costs or tool structure, the greater the incentive to hit targets, which increases the value of key performance indicators in our assessment.

Reporting Assessment:

Lianhe Green believes that transparent reporting of KPIs and SPTs supports the quality of the structure or finance framework of sustainability-linked instruments.

In assessing reporting alignment, we consider the following sub-factors:

 

1.     Reporting transparency: We generally assess the transparency in reporting including disclosure to shareholders, regular and frequent reporting (such as annually and more frequently in the event of triggers), continuous reporting throughout the entire period related to SPTs and trigger events, and disclosure to external stakeholders upon the expiration of financial instruments.  

Verification Assessment:

Commitments to post-issuance reviews on the SPT, including the type and frequency of external verification of post-issuances, are relevant to our assessment of alignment with the principal score.

In assessing verification alignment, we consider the following subfactors:

1.   Verification: We typically assess whether there will be external verification of performance against KPIs and SPTs by a qualified third-party auditor, which we believe would ideally include technical analysis. We also assess the associated impacts and their impact and timing on the financial or structural characteristics of the instrument. 

 

Appendix

Glossary

Vocabulary	Definition
Green Bonds or Loans	Proceeds will be used for green projects and/or environment-related activities identified in the tool document. The instrument may be aligned with the ICMA Green Bond Principles or other principles, guidelines or classifications.
Social Bonds or Loans	Proceeds will be used for social projects and/or social related activities identified in the tool document. The instrument may be aligned with the ICMA Social Bond Principles or other principles, guidelines or classifications.
Sustainability Bonds or Loans	The Proceeds will be used for a portfolio of green and social projects, as well as activities related to environmental and social identified in the tool document. The instrument may comply with the ICMA Sustainability Bond Code or other principles, guidelines, taxonomies.
Sustainability-Linked Bonds or Loans	Financial and/or structural features are linked to pre-defined sustainability goals. These characteristics may be aligned with the ICMA Sustainability-Lined Bond Principles or other principles, guidelines or taxonomies. This instrument is often referred as an SLB (Sustainability-Linked Bond) or SLL (Sustainability-Linked Loan).
Key Performance Indicators	Key performance indicators are quantifiable indicators used to measure the performance of selected indicators.
Sustainability Performance Targets (SPT)	The target is mapped to and measured by key performance indicators, and the issuer commits to achieving these key performance indicators within a predetermined timetable. Sustainable development performance goals need to reflect the issuer's grand planning and determination in sustainable development, be sufficiently positive and meaningful, benchmark against benchmarks as much as possible, and be aligned with the issuer's overall sustainable development/ESG strategy or Sustainability policies.
Verification	Verification or certification, usually in the form of limited or reasonable assurance, performed by an independent third party with relevant expertise and qualifications.
Science Based Targets initiative (SBTi)	Specific indicators are used to measure the achievement of goals. Targets are considered science-based if they meet evidence-based standards widely accepted by the scientific community, such as targets based on the latest climate science. These targets are considered necessary to achieve the goals of the Paris Agreement to limit global warming to no more than 2 °C above pre-industrial levels and to strive to limit warming to 1.5 °C.
Sustainable Development Goals	The Sustainable Development Goals are a set of 17 goals adopted by United Nations member states in 2015, aiming to establish a common framework for sustainable human development and environmental protection.
Taxonomy	Classification tools that provide a common definition of green assets or activities.

 

 

 

Disclaimer

Second-party opinion methodology and reports issued by Lianhe Green Development Limited (hereinafter referred to as "Lianhe Green", "the Company" or "we") are subject to specific terms and conditions. Please read these terms and conditions on our website www.lianhegreen.com.

A Lianhe Green SPO is an assessment of the financing instruments or financing frameworks of entities. It is not a credit rating. 

Please note that our report which issued in accordance with this methodology is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of financial instruments and securities. 

Our assessments are not considered investment advice and they are not and should not be considered as a replacement of any person's own assessment of the ESG factors related to a financial instrument or an entity. Lianhe Green does not represent, warrant or guarantee that our report will fulfil any of your or any other person's particular purposes or needs. Lianhe Green does not recommend the purchase or sale of financial instruments or securities or give investment advice or provide any legal, auditing, accounting, appraisal or actuarial services. 

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